Is Employee Poaching Illegal in Texas Cities Like Austin, Dallas, Houston and San Antonio?

by Joel Cheesman

Breaking Down Poaching Laws in The Lone Star State

Texans sometimes refer to those who recruit employees from other companies as "employee rustlers." Strictly speaking, rustling employees is not illegal in Texas. Texas does, however, have laws related to hiring; poaching employees can sometimes lead to lawsuits.

Recruiters can stay out of legal trouble in Texas by paying attention to four key factors.

Non-Compete Agreements

Every business knows its competitors. In some cases, a recruiter will approach a competitor's top performer to see if he or she has interest in changing employers. At other times, the HR department will note the name of a competitor on an applicant's resume.

To avoid legal issues, the first step in the hiring process is determining whether the potential employee has signed a non-compete agreement with the current or previous employer.

A non-compete clause in an employment contract prevents an employee from going to work for a competitor of his or her employer after leaving the business.

To be enforceable in Texas a non-compete agreement must be reasonable. The clause cannot restrict employee mobility or restrain free trade and commerce. Employers may want to consult an attorney to be sure that an applicant's non-compete agreement allows the individual to accept an employment offer from a competing company.

If a previous employer seeks to enforce a non-compete agreement by going to court, the company must be able to prove potential harm. Because Texas is a right to work state, the court will look at the right of employees to work versus the enforceability of the contract provisions.  

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Non-Solicitation Agreements

Texas non-solicitation agreements prohibit employees from soliciting the previous employer's clients, employees, or both. If you are hiring an employee who worked for a competitor, be aware that he or she cannot automatically enlist clients and fellow employees as part of your employment offer.

A new employee may send a neutral notification that he or she has changed employers but cannot directly ask that clients follow. A non-solicitation provision restricting the employee from soliciting customers with whom he or she personally dealt is likely enforceable.

Under Texas law, no-solicitation agreements are subject to the same scrutiny as non-compete agreements. A non-solicitation agreement cannot prohibit a former employee from soliciting clients with whom he or she had no dealings during employment.

Time and Geography Limits

Non-compete and non-solicitation agreements do have limits. Typically, the agreement has a set amount of time and is within a prescribed geographical area.

If challenged in court, the court will review the time period specified by the non-compete agreement to make sure it is reasonable. The geographical limitations established by the non-compete agreement will also be reviewed.

In terms of solicitation, a two-to-five year restrictive period is generally considered reasonable.

Trade Secrets

In 2016 Texas enacted the Texas Uniform Trade Secrets Act (TUTSA). Under TUTSA an employer can require employees, independent contractors, and customers to sign a non-disclosure agreement before viewing certain information.

In legalese: if an employer hires a new employee who possesses trade-secret information from a former employer, the new employer could be liable for misappropriation if the new employer has reason to know that the information provided by the new employee was acquired by improper means.

Employees cannot bring trade secrets to a new company.

What to watch

Texas courts are seeing more cases of non-compete clauses versus free speech.

In a recent case, Jeffrey Hieber, a former employee of Percheron Holdings, LLC, sought to dismiss a case related to violating his non-compete and non-solicitation agreements. (Hieber v. Percheron Holdings, LLC) Hieber moved to dismiss the lawsuit based on the Texas Citizens Participation Act (TCPA).

Under the TCPA, a defendant may move for dismissal of a legal action that arises out of "a party's exercise of the right of free speech, right to petition, or right of association."

However, the TCPA includes a commercial-speech exemption, stating that the TCPA "does not apply to a legal action brought against a person primarily engaged in the business of selling or leasing goods or services, if the statement or conduct arises out of the sale or lease of goods, services, or an insurance product, insurance services, or a commercial transaction in which the intended audience is an actual or potential buyer or customer."

Percheron convinced the court that the speech at issue fell within the commercial-speech exemption, which protects employers when former employees are hired by a competitor.

Texas has seen approximately twenty cases in the past few years where a former employee moved to dismiss a lawsuit by citing the TCPA.  

Poach Founder Joel Cheesman

About the Author

Joel Cheesman is the founder and all-around handyman at Poach. When he's not busy putting together the world's most perfect poaching machine, he's creating content like this. He calls Indianapolis, Ind. home.